Reference no: EM132983641

Chad Boudreaux is a 58-year-old riverboat captain. He grew up in New Orleans and has worked on the Mississippi River his entire life. He works for a private company in New Orleans called Crescent River Pilots Inc. (CRP) and is married to Patricia, who is 35 years old. They have a seven-year-old son, named River. CRP sponsors a 401(k) plan that offers a Roth account and a separate ESOP.

Chad has the following retirement plan accounts:

Account Description

ESOP account from CRP - consists of CRP shares. The cost basis for the shares is $75,000.

401(k) Plan From CRP Inc. 401(k) Plan from Schlumberger, where he worked in his thirties

Roth IRA (established in 2000 with a $2,000 initial contribution; three years ago he rolled over a traditional IRA with a balance of $10,000)

Traditional IRA (established twenty years ago with $15,000 of after-tax contributions)

Inherited IRA from the death of his mom. She died in the same year Chad turned 50 years old.

Current FMV Beneficiary $400,000 $800,000

Patricia                   Patricia

River                              River

$90,000                    $45,000

$90,000                     $120,000

Problem 1. If Chad took a $20,000 distribution from his traditional IRA to pay for the vacation, what are the tax implications?